Prieur Perspective: Markets Enter a Bottoming Phase?

Investors’ mood benefited last week from the potentially positive implications for the global economy emanating from the London G20 meeting and the decision by the Financial Accounting Standards Board to relax mark-to-market accounting rules. And the previous week’s announcement of the Geithner plan to remove toxic assets from the balance sheets of banks was also still seen as a tailwind for stock markets.

Has the avalanche of policy actions and bank guarantees backstopped the global economy? If stock markets are a gauge of better tidings, it would seem that a bottoming phase might have started. Risk-taking investors pushed the S&P 500 Index to a straight 4-week winning streak, registering a gain of 23.3% -  the strongest since April 1933. But the jury is still out on whether the bear is simply offering a temporary reprieve.

The performance of the major asset classes is summarized by the chart below, courtesy of StockCharts.com.


Click to enlarge

For discussion of the direction of stock markets, see my recent posts Video-O-Rama: The Road to Recovery, Schiff interviews Faber, Global Markets: Signs of Recovery? and Donald Coxe: Investment Recommendations (March 2009). (And do make a point of listening to Donald Coxe’s webcast of April 3, which can be accessed from the sidebar of the Investment Postcards site.)

Economy

“Business pessimism remains deep and widespread across all industries and regions of the globe. Survey responses regarding hiring and equipment and software investment fell to record lows last week,” said the latest Survey of Business Confidence of the World conducted by Moody’s Economy.com. However, the Survey concluded that it was encouraging that businesses were becoming steadily less negative about the economy’s prospects later this year.